Carpet group set to roll out growth with £50m acquisition

Ceramiche Serra

Worcestershire carpets and floorcoverings group, Victoria has expanded its product range with the £50m acquisition of an Italian floortiles manufacturer.

The Kidderminster-based group said it had agreed to acquire Bologna-based Ceramiche Serra for €56.5m (£50.4m), with the deal being funded from the company’s cash reserves and existing debt facilities.

It said €36.5m (£32.6m) would be paid on completion, with the balance of €20m (£17.8m) paid over the next four years, subject to the business meeting annual targets in earnings before interest, tax, depreciation and amortisation (EBITDA).

Victoria said the acquisition would be immediately and significantly earnings accretive.

Serra, operating from sites in Serramazzoni, Sassuolo, the heart of the Italian ceramics industry, manufactures ceramic flooring, which is sold domestically and exported internationally. It sells to a combination of wholesalers, retail groups, and independent stores throughout Continental Europe, North America, and the Far East.

The acquisition marks Victoria’s first move into the ceramic flooring market, which is the largest flooring sector in the world, representing over 60% of flooring sold globally and 30% of flooring sold in Europe.

It said the acquisition therefore opened a large new market to Victoria, with the board confident there is significant opportunity for further acquisitions in the sector, resulting in a number of commercial, operational and financial synergies – creating additional value for Victoria’s shareholders in the medium term.

In line with Victoria’s acquisition criteria, the management team at Serra have committed to running the business as part of Victoria for a minimum period of four years and continuing to develop its growth.

For the year ended December 31, 2016, Serra generated audited revenues of €28.2m (£25.2m), EBITDA of €10.5m (£9.4m), and EBIT of €10.0m (£8.9m).

The deal is expected to complete in December.

Geoff Wilding, chairman of Victoria, said: “Serra is a very important acquisition for us and one which reinforces our strategy of targeting earnings enhancing acquisitions to expand our business, in addition to our focus on organic growth. It will make an immediate positive contribution to Victoria’s performance whilst diversifying our market exposure. Post-completion, nearly 40% of Victoria’s earnings will come from outside the UK – continuing our transformation into a genuinely international flooring business.

“Shareholders will recall that we signalled our intention to expand into hard flooring some 12 months ago and subsequently acquired our first hard-flooring business, Australian manufacturer/distributor Dunlop Flooring, in January of this year. Since then we have conducted extensive due diligence on the sector in Europe and explored a multitude of potential opportunities, as well as recruiting a senior, director-level hard flooring expert in May of this year. Given this planning and preparatory work, Serra is the first of a number of acquisitions we expect to make in the ceramic flooring sector.

“It has been some eight months since our last acquisition, Avalon/Grass Inc in the Netherlands, which has now been fully integrated within Victoria and is contributing to our performance. Our strategy of achieving scale through acquisitions and using that scale to extract operational synergies continues to deliver value for the Group and we look forward to developing the Serra business as part of Victoria.”

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